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HMRC internal manual

Self Assessment Manual

From
HM Revenue & Customs
Updated
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Transfer of liability: regulations 72/81 and SA: regulation 72(5) condition A direction

The Recovery Officer has discretionary authority to direct under Regulation 72(5) condition A that an employee shall pay tax that the employer has failed to deduct.

The Recovery Officer must be satisfied that

  • The employer took reasonable care to comply with the PAYE regulations

And

  • The failure to deduct the correct amount of tax was an error made in good faithThe Recovery Officer must have from the employer a full and proper explanation for the under-deduction.

Where the Recovery Officer decides the employer did take reasonable care in operating PAYE and the error was made in good faith

  • The employer and employee are notified of the decision
  • The employee has a right of appeal against the direction and the employer has a right to make representations to the Appeal Commissioners or to be heard by them
  • Form P106 is sent to the relevant Employers Section if the direction is unopposed or it is upheld by the Appeal CommissionersWhere the Recovery Officer is not satisfied that the explanation provided by the employer indicated that the employer took reasonable care or that the error was made in good faith they will issue a Refusal Notice to the employer requesting payment for the under deduction.

The employer has a right of appeal against the Refusal Notice and the employee has a right to make representations to the Appeals Commissioners or to be heard by them.

PAYE Credit in the SA return

The notes to the SA return advise the taxpayer to enter the figure of tax shown on certificate P60. Where this is done and a Regulation 72(5) condition A direction is made, the tax credit given in the calculation of liability under SA will not require amendment (on the assumption the taxpayer has not claimed credit for tax which is under-deducted).

In other circumstances, the credit given in the calculation may require amendment.

Further detail is available in subjects ‘Checking Tax Credit’ (SAM142020) and ‘Amending Tax Credit’ (SAM142010).